A hedge fund is a kind of investment portfolio. What makes this different from others is the fact that it is monitored and managed quite closely and strategically. Hedge funds commonly make use of a variety of positions, with the objective of providing investors with the benefit of excellent returns.

One of the greatest benefits to be gained by investing in hedge funds is, supposedly, the minimization of risk which comes with it. Since there are a lot of investment strategies and options made available for such funds, then the expectation is that investors are a lot less likely to lose money if one of the investment options does not turn out to be so favorable. However, this does not mean that all hedge fund investors are protected, because in many cases, hedging is done primarily to raise returns and not to reduce risk. If the entities managing a fund are heavily involved in speculative investments, then it may pose an even greater risk for the hedge fund.

In many cases, it may not be so easy to get into hedge fund investments because the initial investment requirement can be set quite high. At the same time, such arrangements may be made available to a small number of private investors only. These investors may have to receive accreditation before they are allowed to invest in the fund, which also means that they are more likely to have greater experience in investing. In addition to this, a minimum net worth as well as annual income may be set as requirements. Beginning investors are thus better off exploring other types of investments.